ASK15:

Are lease options a good idea?

This week on Ask Rob & Rob, Roy Faulkner asked:

Are lease options a good idea?

A lease option, for those who don’t know, is where you agree with a vendor that you have the option to buy their house from them at some point in the next X years (depending on the option) at an agreed price, and in the interim you take the property over and rent it out. You will usually cover their mortgage, rent the property out as a BTL, and then have the option to buy the property at the price you decided when you signed the option.

Sounds like a good idea, so why don’t more people do this? Well, the main target market for lease options are people in negative equity. During the crash there were lots of people in this position, but nowadays it’s not so likely. This strategy relies on finding people in negative equity. There are also examples where folks have taken advantage of people in tough situations, giving lease options some bad press.

Finally though, the answer to this question touches upon the fact that lease options are hard work. Finding these opportunities in the first place is tough, and digging up the right properties is going to be your biggest challenge.

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